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Higher mortgage balances pushed total consumer debt up in the first three months of 2011, the first quarterly increase in more than two years, according to the Federal Reserve Bank of New York.
U.S. household debt totaled $11.5 trillion in the first quarter, down 8.2% from its peak in the third quarter of 2008. But for the first time in nine quarters, debt increased $33 billion, or 0.3%, from the end of last year.
"Behind the leveling off of total consumer debt was a small increase in mortgage balances shown on consumer credit reports," the NY Fed said in its report.
Lenders originated $499 billion in new mortgages during the first quarter, a 31% increase from one year ago. It's the third consecutive increase, according to the study.
While originations are up 65% from the low in 2008, they remain 34% below averages seen during the housing bubble between 2003 and 2007. Household mortgage debt remained 8.1% off its peak. Home equity lines of credit are 9.9% below that peak.
Analysts at Bank of America Merrill Lynch believe the $10.5 trillion of outstanding mortgage debt they measure is still about $1 trillion too high due to the collapse in home prices.
"A good portion of this excess debt should ultimately be defaulted on and written off," the analysts said. "The natural lender response to this reality has been to reduce the supply of credit for all but the best borrowers."
Delinquency rates on mortgages improved as well. According to the study, 28% of loans in early delinquency – 30 to 60 days past due – transitioned into serious delinquency. That's down from 30% in the previous quarter and lowest rate since the third quarter of 2007.
"This improvement was accompanied by a higher cure rate with the transition rate from early delinquency to 'current' increasing in the quarter," according to the NY Fed.
Roughly 368,000 consumers had a foreclosure added to their credit reports during the first quarter, a 17% drop from the previous period. New bankruptcies fell 13% to 434,000.
Those states hardest hit by the financial crisis in 2008 and the following credit crunch are healing faster than areas of the country that escaped the brunt of the damage.
"Data for Arizona, California, Florida and Nevada continue to indicate higher than average delinquency and foreclosure rates, but these rates are falling faster on average than in the rest of the country," the NY Fed said.
Write toJon Prior.
Follow him on Twitter @JonAPrior.

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